Undoubtedly, The European single market is one of the EU’s most outstanding achievements to date. “It has created one territory, with more than 500 million inhabitants, without any internal borders or other regulatory obstacles to the free movement of goods and services.” (The economic benefits of the EU Single Market in goods and services – ScienceDirect)
The graph below shows the labor costs in the different EU member states. Note how they differ significantly: In 2021, the average hourly labor cost was €29.1 in the EU, ranging from €7.0 in Bulgaria to €46.9 in Denmark.
These statistics on the estimated hourly labor costs show that regardless of common regulations, standards, and norms, the European single market also consists of many different sub-markets with significant fluctuations in standard hourly wages and non-wage labor costs.
Lower-cost countries may seem attractive for companies expanding in Europe; you should also consider other factors before making any investment decisions and moving some of your operations to the EU, -for example:
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Local Marketing and Pricing:
a lower labor cost market can mean you need to adapt your pricing strategy in these countries, which can conflict with your existing pricing model.
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Local tax rates:
While the EU oversees national tax rules in some areas concerning EU business and consumer policies, the EU has no direct role in setting tax rates. You will have to learn more about the tax rates of your target market.
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Ease of doing business per country:
The 2020 edition of the report in which EuCham ranks and analyzes 46 European countries according to their economic environment.
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Additional local advantages:
You might get something for our higher labor costs that may even save you money in the long run. In Luxembourg, for instance, you will benefit from a multilingual, highly educated, productive workforce. Also, the country’s relatively small size will make it easy for you to resolve any administrative issues quickly.
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Location and proximity:
Where will you find your key customers? How will you reach and serve them? What do your distribution and communication channels look like? Like anywhere else, business customers still prefer dealing with businesses near them.
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Which languages do your customers speak?
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Other considerations
Low labor costs can help you keep your costs down. Moreover, no matter where you are within the EU, your business will still benefit from a skilled workforce working in countries with excellent infrastructures.
Businesses must gauge all pros and cons and ultimately ask themselves what they want to achieve. Just looking at costs can be more costly than one might think. A local agent will help you shed light on all these considerations and help you to base your decision on solid ground.
Wages and labour costs – Statistics Explained (europa.eu)
